US natural gas futures eased on Friday as production edged higher despite forecasts for steady above-normal temperatures through late June expected to boost cooling demand. Front-month gas futures fell 1.9 cents, or 0.6 percent, to settle at $3.037 per million British thermal units.
That left the front-month flat for the week, masking what was a volatile period with the contract posting its biggest percentage gain since early April one day and falling to a near 13-week low another. US gas consumption was projected to average 75.1 billion cubic feet per day for the next two weeks, up from 70.6 bcfd this week as temperatures climb and power generators burn more gas to meet rising air conditioning demand, according to Reuters data.
US production has slowly but steadily climbed over the past two months. Output over the past 30 days was now higher than the same period a year ago, averaging 71.4 bcfd versus 71.3 bcfd in 2016.
That, however, was still less than the 73.0 bcfd average seen during the same period in 2015, when production was at a record high. US exports, meanwhile, were expected to average 8.1 bcfd this week, up 50 percent from a year earlier, the data showed. Analysts said utilities added 65 bcf of gas to storage during the week ended June 16, leaving inventories about 8 percent above-normal for this time of year. That compared with a 63 bcf increase during the same week a year earlier and a five-year average build of 83 bcf for the period.
Meteorologists forecast this summer will be slightly warmer than normal, but not quite as hot as last year, prompting power generators to burn a little more gas than usual to meet air conditioning demand, though less than in 2016. Analysts forecast gas inventories will rise by only 1.6 trillion cubic feet during the April-October injection season due to relatively low output so far in 2017 and mounting sales abroad.
The build, which is far below the five-year average of 2.1 tcf, would leave storage at just 3.7 tcf at the end of October, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. After two unusually mild winters, traders say the possibility of low inventories and normally cold weather next December to February could cause prices to spike late this year. But with inventories holding at above-normal levels for this time of year and production slowly rising, speculators have lost the rationale to keep bullish bets near record highs over the past few weeks. Last week, they cut their net longs by the most on record.
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